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Property Price Trends in Chennai

Last updated: July 14 2020
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  • Re : Property Price Trends in Chennai

    Originally posted by nabishek
    Let me share my experience during then..I was looking to buy during that time and encouraged by the stagnation in the market and 20-30% price correction already to 2008 peak price was expecting another 1-2 years lull and better bargains..This is what I saw

    1. Market was very slow, no new mid housing projects were launched.
    2. Ongoing projects still had flats available, but price was steady.
    3. Ready to occupy projects were available close to launch price, but choice was less.
    4. Land sales were at a bargain mostly distress sales, land were cheaper compared to the flat prices in the locality.
    5. Builders started focussing on Luxury housing and targetting only the rich (HNI/NRI/Expats).

    I see the same happening all over again.

    When the market was about to collapse, government intervened asked banks to restructure the loans and with the infusion of liquidity in the market and global recovery, RE market in chennai recovered sharply and made up the losses for the stagnant years.

    I invite members to share their views on whether have we reached the top finally?
    IMO, this time looks different to me and here is why. Short term rates is likely to remain elevated for foreseeable time. Interest rates of 8-9% is history - till we bring growth and inflation under control. What brought the rental yield from 4-5% of 90s to 2% in the next decade is the interest rate. We have been in a low interest rate regime for too long a period like Western world despite a spiraling inflation. Currency paid for it recently and in order to stabilize the currency, they have to do what they should have done long time ago in the first place - raise interest rates or elevated interest rates for 3-4 years is likely to remain. Some of the reports I read and recent Morgan Stanley report likens the current period to be that of '98 where we got the tail wind of US slow down in 2001 and that brought down the interest rate overall.

    If investors can get 12% in a relatively risk free debt instrument and with liquidity, our RE yield cannot remain at 2-2.5% and it is unsustainable. I don't see rental rising to catch up to 3% yield. Given the run we have had, aided by so many sanguine factors of the last decade, RE capital prices are very vulnerable given the level of value destruction seen in most respected companies which can be a portent of how it sees the economy in the future. General argument that RE will have to rise with inflation cannot apply to any price levels. Because, the last 10 year rise did not account for just inflation. Interest rate played a very big role and if that raises and remains at an elevated level, inflation argument is unlikely to hold. Why are the companies with tremendous pricing power which are getting killed today? Demand destruction is inevitable at certain prices and Cos cannot keep on increasing prices just because they can. Same hold with RE rentals and prices.

    I strongly believe people need a home to live and one cannot time the market. While you do that, do not stretch your affordability extrapolating the last 10 year pattern to continue, throwing the caution to wind. For investors, you may find very select value if you comb but at broader price levels I see, there is a greater disconnect to the economy and the situation we are in. This too shall pass cannot save your investment if there is no adequate discounting.

    Disclaimer: Above are purely my opinion - needless to say. Do not base your buying/selling decision based on above and use your judgement and take the right level of risk that you can handle.
    Last edited September 3 2013, 01:10 PM.

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    • Re : Property Price Trends in Chennai

      Originally posted by lovebirds43k View Post
      I don't think so.

      In OMR prices are still at 6500 to 8000 per sqft
      I dont think it is appropriate to generalise a 30 km stretch as one area with only one half of it with in corp limit AND supply-demand varies at different pockets. By the way, where in OMR, they are selling at 8000 rs/sqft and who is buying it. please dont include projects like Hira in to this where price rise is notional. Going fwd if there is any price correction in Chennai RE, few pockets along OMR will be hit first.
      Last edited September 3 2013, 02:01 PM.

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      • Re : Property Price Trends in Chennai

        Is the NHB index a bucket of RE prices in a location with a mix of plots & apartment prices ? the reason I am asking that is between 2007-13 the zone 4 covering aynavaram, pursai, kolathur shows a 7 fold increase? Have the apartment price gone up by 7 times or has the plot rate gone up by only 7 times during this period? Or if you take Zone 7 - chetpet, egmore has the price increased by ony 1.8 times during this 2007 -13 period? And if 2007 is taken as base year with 100 points does it mean prices in chetpet/egmore in 2007 was same as in places like zone 4 areas like kolathur or kolathur in 2013 is more costly than chetpet/egmore in 2013 or for that matter zone 10 areaas like adyar,, T'yur, velachery? Confused with these numbers and how to interpret and read it correctly...Can somebody who knows this explain please?

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        • Re : Property Price Trends in Chennai

          Originally posted by Rameshr49 View Post
          Is the NHB index a bucket of RE prices in a location with a mix of plots & apartment prices ? the reason I am asking that is between 2007-13 the zone 4 covering aynavaram, pursai, kolathur shows a 7 fold increase? Have the apartment price gone up by 7 times or has the plot rate gone up by only 7 times during this period? Or if you take Zone 7 - chetpet, egmore has the price increased by ony 1.8 times during this 2007 -13 period? And if 2007 is taken as base year with 100 points does it mean prices in chetpet/egmore in 2007 was same as in places like zone 4 areas like kolathur or kolathur in 2013 is more costly than chetpet/egmore in 2013 or for that matter zone 10 areaas like adyar,, T'yur, velachery? Confused with these numbers and how to interpret and read it correctly...Can somebody who knows this explain please?
          To my knowledge

          NHB Index is currently only for residential property and not for commercial or lands.

          When they say chetpet was 100 in 2007 and now it is 180. Then it means a total return of 80% over 6 years and an annual return of 9.6%. It is a simple rate or return calculator.

          Coming to Kolathur it is around 34% return annually as per index. And not to be surprised some parts of that area have really gained and I have seen one such transaction of a relative selling an land. But that is history.

          Formula for annual rate of return

          ((sold price/investment price) to the power (1/no of years)) -1 *100 (in %)

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          • Re : Property Price Trends in Chennai

            deleted

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            • Re : Property Price Trends in Chennai

              Originally posted by srivat View Post
              To my knowledge

              NHB Index is currently only for residential property and not for commercial or lands.

              When they say chetpet was 100 in 2007 and now it is 180. Then it means a total return of 80% over 6 years and an annual return of 9.6%. It is a simple rate or return calculator.

              Coming to Kolathur it is around 34% return annually as per index. And not to be surprised some parts of that area have really gained and I have seen one such transaction of a relative selling an land. But that is history.

              Formula for annual rate of return

              ((sold price/investment price) to the power (1/no of years)) -1 *100 (in %)
              So if i understand it right, the base of 100 (in 2007 ) across various zones in a city for a year should not be read as same price. It could be Rs.2000/Sqft in one zone and Rs.9000/Sq.ft in some other zone. And individually each of the current index in a zone is more to determine the price appreciation within a zone.

              Any reason why some specific zones have seen 7 times appreciation while some zones less than twice over this 6 years? Is it new infrastrcuture, metro/mono or any development that can be attributed to this significant difference in appreciation apart from the reason like the base price in areas like adyar, T'yur was already higher in 2007 itself(higher base price) Or was it the north chennai was catching up with the rest of chennai due to builder interest?

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              • Re : Property Price Trends in Chennai

                I think the NHB index is calculated only based on official transaction rates. The black money component in any resale transaction will probably not be accounted in getting the index. So, if a year has more resale transactions and good part of them involve a decent amount of black component, then the index will be skewed lower for the period. If another year has mostly non-resale transactions, then comparison between the earlier year might show better increased index numbers. But, overall the index points to the increase or decrease trend....

                Comment


                • Re : Property Price Trends in Chennai

                  Originally posted by Rameshr49 View Post
                  So if i understand it right, the base of 100 (in 2007 ) across various zones in a city for a year should not be read as same price. It could be Rs.2000/Sqft in one zone and Rs.9000/Sq.ft in some other zone. And individually each of the current index in a zone is more to determine the price appreciation within a zone.
                  Yes


                  Originally posted by Rameshr49 View Post
                  Any reason why some specific zones have seen 7 times appreciation while some zones less than twice over this 6 years? Is it new infrastrcuture, metro/mono or any development that can be attributed to this significant difference in appreciation apart from the reason like the base price in areas like adyar, T'yur was already higher in 2007 itself(higher base price) Or was it the north chennai was catching up with the rest of chennai due to builder interest?
                  I would call it as ignored in past due to being outskirts and seen value later. Infastructure or other things can also be a primary driver.

                  Second is low base effect. Chetpet and other area were already having high base cost. Buyers affordability % decreases.

                  "As I have said earlier it is easier for a company in short duration to make another million from a million but once it enters billion dollar club to make an another billion will take its own time."

                  Comment


                  • Re : Property Price Trends in Chennai

                    Originally posted by sundarjp View Post
                    I dont think it is appropriate to generalise a 30 km stretch as one area with only one half of it with in corp limit AND supply-demand varies at different pockets. By the way, where in OMR, they are selling at 8000 rs/sqft and who is buying it. please dont include projects like Hira in to this where price rise is notional. Going fwd if there is any price correction in Chennai RE, few pockets along OMR will be hit first.
                    Excatly. We can not generalise the whole 30 KM stretch as one zone.

                    Some people are doing it. That is why I made it as counter.

                    Madyakailash to Kottivakkam/Kandanchavadi is one price zone ( Appasawmy projects city side in kottivakkam on OMR,rate is at present 8000), Perungudi/thoraipakkam is another zone. Karapakkam/Shol is another. Navalur/siruseri is one more. Kelambakkam/padur/Thaiyur is another one. Beyond thaiyur till mahab is next one.

                    Different zones command different prices and price upward/correction/ 2 hour power cut or 12 hour power cut like rest of TN are all not common for all these zones.

                    People should not just comment OMR is like this and like that etc for the whole zone.

                    It is like some from Patna commenting in chennai you can get apartment for 3500 per sqft thinking Guduvancheri is chennai

                    Comment


                    • Re : Property Price Trends in Chennai

                      Originally posted by maverick007 View Post
                      IMO, this time looks different to me and here is why. Short term rates is likely to remain elevated for foreseeable time. Interest rates of 8-9% is history - till we bring growth and inflation under control. What brought the rental yield from 4-5% of 90s to 2% in the next decade is the interest rate. We have been in a low interest rate regime for too long a period like Western world despite a spiraling inflation. Currency paid for it recently and in order to stabilize the currency, they have to do what they should have done long time ago in the first place - raise interest rates or elevated interest rates for 3-4 years is likely to remain. Some of the reports I read and recent Morgan Stanley report likens the current period to be that of '98 where we got the tail wind of US slow down in 2001 and that brought down the interest rate overall.

                      If investors can get 12% in a relatively risk free debt instrument and with liquidity, our RE yield cannot remain at 2-2.5% and it is unsustainable. I don't see rental rising to catch up to 3% yield. Given the run we have had, aided by so many sanguine factors of the last decade, RE capital prices are very vulnerable given the level of value destruction seen in most respected companies which can be a portent of how it sees the economy in the future. General argument that RE will have to rise with inflation cannot apply to any price levels. Because, the last 10 year rise did not account for just inflation. Interest rate played a very big role and if that raises and remains at an elevated level, inflation argument is unlikely to hold. Why are the companies with tremendous pricing power which are getting killed today? Demand destruction is inevitable at certain prices and Cos cannot keep on increasing prices just because they can. Same hold with RE rentals and prices.

                      I strongly believe people need a home to live and one cannot time the market. While you do that, do not stretch your affordability extrapolating the last 10 year pattern to continue, throwing the caution to wind. For investors, you may find very select value if you comb but at broader price levels I see, there is a greater disconnect to the economy and the situation we are in. This too shall pass cannot save your investment if there is no adequate discounting.

                      Disclaimer: Above are purely my opinion - needless to say. Do not base your buying/selling decision based on above and use your judgement and take the right level of risk that you can handle.
                      Thank you mav, I share a very similar view and also wrote in another thread

                      https://www.indianrealestateforum.co...427#post116427

                      I am expecting our new RBI governer to increase intrest rates and also allow the rupee to slide even more till its natural resistance..There is news that we are going to pledge gold with IMF and rating agencies are going to downgrade very soon..Things are not rosy..The government may open up all markets including retail very soon as a desperate measure..but we may have to depend on post elections for FDI/FII investments to return..The markets are not assuring enough now..Till then we have to grapple with the slow economy with high cost.

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